Should I take out a Debt Consolidation Loan? 

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If you are juggling multiple debts it can be easy to fall behind with your monthly payments. Consolidating your debt can help.

In Canada, there are several ways to consolidate debt. One of the most common is the Debt Consolation Loan.

How does a Debt Consolidation Loan work?

A debt consolation loan is when a lender – usually a bank, credit union, or finance company – gives you the money to pay off your debts. Instead of having many payments to keep track of, your debt is consolidated (brought together) into one big loan – typically with a lower interest rate.

A debt consolation loan has three main advantages:

  1. You only have a single loan with a single monthly payment to worry about.
  2. Consolidated loans usually have a lower interest rate, which saves you money.
  3. You can plan to become debt-free in a set amount of time.

Can I consolidate all my debt?

Consolidated loans can be useful for paying off a wide variety of consumer and other debt, including:

  • Credit Cards
  • Personal Loans
  • Utility Bills

In Canada, you may not consolidate:

  • Mortgages
  • Car Loans
  • Taxes owing to the Canada Revenue Agency
  • Government Student Loans

Is a Debt Consolidation Loan right for me?

If you are considering a debt consolidation loan, it’s important to start by asking yourself why you are struggling to pay off your debt.

  • Did an unforeseen emergency or specific purchase put you behind on your payments? Consolidation may be a good way to become debt-free.
  • Did you rack up debt because of overspending? Consolidation can help you make a new start – but you’ll also need to look at your spending habits in order to regain control of your debt over the long term.

When you apply for a debt consolidation loan, your lender will need to know that you will be able to pay it back. To decide if you qualify, you’ll need to provide details about:

  • Your income
  • The amount of debt you owe
  • Your credit score

Low-income earners or people with a poor credit score may not qualify. In that case, a home equity loan or a balance transfer credit card may be another option to consider.

If you are not sure if a debt consolidation loan is right for you, or if you don’t qualify for consolidation, it’s best to speak with a professional before it’s too late. No matter how complicated your situation is, the team a Dana MacRae Licenced Insolvency Trustee can help. Call or email us today to start exploring your options.

Dana MacRae licensed Insolvency Trustee has been helping people manage their debt since 2000. With 10 offices across Southwestern Ontario, it’s easy to schedule an appointment. Just go to and book your appointment online. We offer video conferencing, or book a home consultation and have the trustee will come to you (when allowed by COVID-19 protocols). Contact us today at 1.800.665.9965 or to learn more about our services and find the financial solution that’s right for you.

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